Iran’s GDP grew 1.8% y/y in the first quarter of the Persian year (ended June 21), the Central Bank of Iran (CBI) said on September 16.
Iranian economic growth is expected to move into negative territory in the second Persian quarter because the worst effects of the collapse of the Iranian rial (IRR) set in during that three-month period. The currency has lost more than 70% of its value over six months with the economic pressure generated by Washington’s reimposition of sanctions on Tehran taking a heavy toll.
The anaemic growth rate seen in the first quarter stands in stark contrast to the figure recorded for the same period of the previous Persian year, namely 4.6%. However, even that was seen as a disappointment at the time. By that point Donald Trump was in the White House making life difficult for Iran and warning that he would unilaterally withdraw the US from the nuclear deal that shielded the country from heavy sanctions in return for compliance with measures designed to stop Tehran moving towards the development of a nuclear weapon.
Trump went on to withdraw the US from the nuclear deal and announce the snapback of heavy sanctions in May this year.
The accord was signed during the second administration of his predecessor Barack Obama and came into effect in January 2016. Observers including analysts at the Economist Intelligence Unit (EIU) then suggested that Iran needed to clock up double-digit economic expansion figures for a few years to truly restore its economic fortunes. However, some commentators believed that, should the nuclear deal survive political attacks—for instance if Hillary Clinton had been elected US president instead of Trump—Iran would turn out to be a sleeping economic giant that could soon deliver soaring GDP growth.
The country, for instance, has the world’s second largest gas reserves and fourth largest oil reserves and plenty of other valuable natural resources.
As things stand, Trump is attempting to put Iran in an economic noose to force Tehran to the negotiating table to reshape the Islamic Republic’s role in Middle East affairs.
On August 28, Oxford Economics said the second and heavier phase of US sanctions aimed at Tehran—set to take effect on November 5—will tip the Iranian economy back into recession with its GDP set to contract by 3.7% in 2019.
A GDP contraction of 3.7% in 2019 would be the worst economic performance by Iran in six years.
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